Tokyo – Q2/2024
MARKETINMINUTES
Savills Research

Office Leasing
Savills team
Please contact
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JAPANJon Salyards
Managing Director,
Institutional Investment
Advisory+81 3 4330 3266
jsalyards@savills.co.jp
Andy Hurfurt
Managing Director,
Institutional Investment
Advisory+81 3 4330 3328
ahurfurt@savills.co.jp

RESEARCH
Tetsuya Kaneko
Managing Director,
Head of Research &Consultancy, Japan+81 3 4330 3103
tkaneko@savills.co.jp

Recovery gathers momentum
Optimism is growing with firm demand and moderate supply in 2024.
• Office markets appear to maintain positive momentum, withrents experiencing sustained rental growth. Vacancies also
continue to tighten overall.
• Average Grade A office rents in the C5W increased by 1.1%
quarter-on-quarter (QoQ) and 1.9% year-on-year (YoY) to
JPY33,000 per tsubo per month.
• The average Grade A office vacancy rate in the C5W
tightened by 0.1 percentage points (ppts) QoQ but rose by
0.3ppts YoY to 2.9%.
• Average large-scale Grade B office rents saw a modest 0.5%
QoQ increment, translating to a steady 2.1% YoY increase to
JPY25,012 per tsubo per month.
• Vacancy rates in the Grade B market tightened moderately
by 0.8ppts QoQ and 1.2ppts YoY to 2.6%.
• Office markets should continue to see stability in 2024 given
the limited supply of new offices, but a significant influx ofsupply in 2025 may lead to some volatility.
• Mixed-use developments are becoming the standard,offering versatility to meet the evolving demands of tenants,
diversifying revenue streams, as well as boosting the value
of office spaces.

savills.co.jp/insight-and-opinion/“The Tokyo office market has
seen consecutive quartersof improvement, suggestingthat the market has firmly
transitioned to a recovery
phase. Firm office demandlevels are supported bymoderate amounts of new
supply in 2024. Looking ahead,2025 will bring significant new
supply, but pre-leasing appears
encouraging. Bifurcation is
expected to persist, largely
influenced by location and age.”
SAVILLS RESEARCH & CONSULTANCY

1Bryan Kuek
Manager, Research &Consultancy, Japan+81 3 4330 3104
bkuek@savills.co.jp
Simon Smith
Regional Head of
Research & Consultancy,
Asia Pacific+852 2842 4573
ssmith@savills.asia
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Office Leasing

GRAPH 1: Office Rents and Vacancy in Tokyo’s C5W*,
2014 to Q2/2024
Average Grade B Vacancy
Average Grade B Rent (LHS)
16%
14%30,00012%

25,00010%

20,0008%

15,000

6%

10,000

4%

5,000

2%

0

0%

Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q2

35,000

14

15

16

17

18

19

20

21

22

VACANCY RATE

RENT (JPY / TSUBO / MONTH)

Average Grade A Vacancy
Average Grade A Rent (LHS)
40,00023 24

Source Savills Research & Consultancy* Chiyoda, Chuo, Minato, Shibuya, and Shinjuku

GRAPH 2: Grade A Office Rental Index by Ward,2012 to Q2/2024
ChiyodaShinjuku

Chuo
ShibuyaMinatoAverage

200
190
180
Q1/2012 = 100

170
160
150
140
130
120
110
100
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1

Q2

90
12

13

14

15

16

17

18

19

20

21

22

23 24

Source Savills Research & Consultancy

GRAPH 3: Grade A Office Vacancy by Ward,
Q4/2022 to Q2/2024
Q4/2022
Q4/2023

Q1/2023
Q1/2024

Q2/2023
Q2/2024

Q3/2023

11%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
ChiyodaChuo

MinatoShinjuku

Shibuya

Source Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

GRADE A OFFICEThe Tokyo Grade A office market continues
on a growth trajectory, posting its fourthconsecutive quarter rental increment, whilevacancy has tightened over three consecutive
quarters as of Q2/2024, an indication of theongoing early stages of recovery. Averagerents in the central five wards (C5W)
strengthened across all constituent wards on
both a quarterly and annual basis, climbing
by an average 1.1% QoQ and 1.9% YoY to
JPY33,000 per tsubo. Overall, rental growth
was spread out fairly evenly across the C5W.
The average vacancy rate for Grade A
offices in the C5W decreased nominally by
0.1ppts QoQ to 2.9%. Shibuya and Chuo
saw vacancy rates decrease by 0.5ppts QoQ
to 1.2% and 0.4ppts QoQ to 5.5%, whilevacancy in Minato and Shinjuku increased
by 0.4 ppts and 0.1ppts QoQ, respectively.
Elsewhere, Chiyoda remained flat over thequarter, staying the lowest in the C5W.
However, given the lingering flexible work
arrangements, full recovery to the ultratight pre-pandemic levels will likely takesome more time.
Strong corporate profits have contributed
to greater levels of floor space expansion
to accommodate proactive hiring activity
and growing headcounts, which in turnhas driven demand for office space.
Furthermore, many companies havecapitalised on the comparatively looser
office market, implementing long-overdue
relocations and expansions in accordancewith new office requirements and layouts.
Moreover, the new office supply forecast in
2024 will be relatively modest compared
to previous years, which should provide
more room for the absorption of existingvacancies from last year’s large new supply
as well as secondary vacancies. All in all,this raises prospects for steady recovery
over the rest of the year. Nevertheless,a significant amount of office supply is
expected in 2025, and competition fortenants is likely to intensify, especially forlandlords with large existing vacancies andolder offices in less accessible locations.
LARGE-SCALE GRADE B OFFICES
The large-scale Grade B market continues
to recover along with the Grade A market,
with average rents rising by 0.5% QoQ and
2.1% YoY to JPY25,012 per tsubo. Chuo andShinjuku saw the largest rental growth at
1.0% QoQ and 0.8% QoQ, respectively.
Meanwhile, Shibuya saw rents increase 0.3%
QoQ, while Chiyoda and Minato saw mild
upticks of 0.1% QoQ. Similar to the Grade
A market, bifurcation persists within thesurveyed submarkets, with modern offices
in prime locations generally continuing toexperience rental increments with virtuallyno vacancies, while older offices in less2

accessible areas continue to experience
persistent elevated vacancies.
Average Grade B vacancy tightened forthe third consecutive quarter, dropping by
0.8ppts QoQ to 2.6%. Minato and Chuo,
which have the highest vacancy rates, saw
the greatest tightening by 1.4ppts QoQ
and 1.3ppts QoQ, respectively. Grade B
office vacancy in Shibuya fell below the 1%
mark for the first time since the onset ofthe pandemic, tightening by 1.2ppts QoQ
to 0.3%. Elsewhere, Shinjuku recorded amodest decrease of 0.4ppts QoQ while
Chiyoda increased slightly by 0.3ppts QoQ.
In March 2024, a survey conductedby the Tokyo Metropolitan Government
revealed a declining trend in remote work
implementation by companies, with theproportion decreasing from 63% in March2022 to 52% and 43% in the same month of2023, and 2024, respectively. Furthermore,
smaller companies, particularly SMEs which
are typically Grade B tenants, are evenless inclined to implement remote work
options compared to larger companies,
and this trend should theoretically drive
more demand in the Grade B office market.
Overall, Japanese corporations have been
performing well, and the competitive andtight labour market should incentivise morecompanies to prioritise quality workspaces
to attain a better edge in talent acquisition
and retention. For a more in-depth overview
of the Large-scale Grade B offices, pleaserefer to our “Tokyo Grade B Office” report.
GRADE A RENTS AND VACANCYRATES BY WARD
ChiyodaIn Q2/2024, average rents in Chiyoda
strengthened by 1.4% on both quarterly andannually basis, reaching JPY39,363 per tsubo,
and average vacancy remained unchanged
over the quarter, holding steady at 1.1%.
Chiyoda is known as the premier business
district, home to many leading domestic andinternational companies, and maintains its
leading position with the highest rents andtightest vacancy rates among the C5W.
Mitsubishi HC Capital announced its
relocation of its headquarters to Torch
Tower, which is slated to become Japan’stallest building upon its scheduled
completion in March 2028. The company
aims to consolidate its dispersed offices,
leasing 6,000 tsubo of office spaces acrossthree floors of the new building, to enhancegroup communication and synergy. Anothernotable impending office movement is
Sompo Himawari Life Insurance, whichplans to relocate its headquarters to the
Sompo Japan Kasumigaseki Building
between July and August 2024, leasing
approximately 5,000 tsubo, occupying
nearly all floors of the building.

Office Leasing

Chuo
Chuo saw rents climb by 0.8% QoQ and 0.7%
YoY to JPY31,809 per tsubo. Average vacancy
continues to improve, tightening by 0.4ppts QoQ
to 5.5%. Vacancies in prime areas around Tokyo
station remain limited, and rents appear stable. In
addition, the upcoming TODA BUILDING, slated
for completion in October 2024, is rumoured to bemostly pre-leased, with notable tenants including
the building developer, TODA CORPORATION,
leasing 5,000 tsubo, Cosmo Oil securing 2,900
tsubo, and Ajinomoto expressing interest in leasing
5,000 tsubo, among others. Meanwhile, in theTokyo bay area, particularly in Harumi, rents havebeen creeping up slightly over the past quarter,
demonstrating slight growth in demand despite
persistent vacancies. However, bifurcation in Chuo
Ward remains prevalent, as modern properties
with desirable amenities in prime locations
experience tight vacancies while older offices in theless accessible areas continue to face difficulties infinding tenants.
Looking ahead, Toei announced the relocation of
its headquarters to Kyobashi Edogrand, reportedly
leasing an approximate 1,500 tsubo of officespace in 2025, while its current headquarters,
Toei Hall, is set to be redeveloped. Elsewhere,
Hochiki will relocate its three headquarters, twofrom Shinagawa ward and one from Minato ward
into the tentatively named Nihombashi-Honcho
1-Chome 3-Ban Project, a wooden office buildingin April 2027. The company plans to lease an
estimated 1,400 tsubo of office space.

MinatoMinato rents increased by 1.0% QoQ and 1.6%
YoY to JPY30,636 per tsubo while vacancy
loosened slightly by 0.4ppts QoQ to 5.5%. The
limited number of new completions in 2024
should result in improvements in average rents
and occupancy for the remainder of the year. In
addition, upcoming completions in Minato arealso garnering interest. That said, rental growth islikely to remain subdued for the time being due toelevated vacancy rates.
Mitsui Knowledge Industry, a subsidiary of
Mitsui & Co., will relocate its headquarters
to the tentatively named Minami-Aoyama
3-Chome Project, a mixed-use building slated
for completion in March 2026, reportedly
leasing around 3,300 tsubo of office space.
Meanwhile, Maruha Nichiro will relocate its
head office to THE LINKPILLAR I SOUTH in
TAKANAWA GATEWAY CITY in February 2026,
leasing approximately 3,000 tsubo of floor area.
Elsewhere, Iwatani intends to sell its current
headquarters building, completed in 1972, andrelocate to the newer Nippon Life Hamamatsucho
Crea Tower, leasing a total of 2,400 tsubo offloor area, with the company aiming to reduce
office space by approximately 30% to streamline
operations and improve the office environment.
ShibuyaShibuya’s average rents experienced a moderate
uptick of 1.3% QoQ and a significant increaseof 3.6% YoY, reaching JPY36,109 per tsubo.
Additionally, vacancy tightened by 0.5ppts QoQ
to 1.2%. Shibuya has consistently maintained

low vacancy rates, with a majority of prime officebuildings fully occupied. With limited new officesupply expected in the near future, the officemarket in the ward should remain stable.
Secom Trust Systems showed interest in
relocating its headquarters from Shinjuku ward
to Daiwa Sasazuka Tower, aiming to lease about
1,000 tsubo of office space. Additionally, WeWork
aims to expand its office space in Shibuya
Scramble Square by leasing the entire 42nd floor,
adding approximately 900 tsubo to its current
5,200 tsubo of office space. Elsewhere, Sprix andAmbition DX Holdings are seeking to increase
their office space by relocating to Shibuya Sakura
Stage Shibuya Tower and Yebisu Garden Place
Tower, respectively, leasing around 800 tsubo ofoffice space each.
Shinjuku
Average rents in Shinjuku climbed by 0.6% QoQ
and 2.2% YoY to JPY27,083 per tsubo, whilevacancy loosened marginally by 0.1ppts QoQ to
1.3%. Demand for office spaces from domestic
companies in Shinjuku has been firm. Similar
to the Shibuya submarket, Shinjuku, which has
seen only a small amount of recent new supply,is also expected to experience limited new officedevelopments in the near future. The next major
addition, the Meiji Yasuda Seimei Building, isslated for completion in May 2026 and has alreadyattracted interest from potential tenants for about
30% of its space. With the second lowest averagelevel of vacancy behind Chiyoda, Shinjuku is
expected to remain strong for the near term.

MAP 1: Average Rents Per Tsubo in Selected Submarkets, Q2/2024

¥30.2

¥28.2
¥31.6

¥44.3
¥35.7

¥30.9

¥22.5

¥34.2
¥27.5

¥38.1

Source Savills Research & Consultancy
Grade A Office, average passing rent + CAM per tsubo per month in thousand JPY. Coloured areas for illustrative purposes only.

savills.co.jp/insight-and-opinion/

3

Office Leasing

TABLE 1: Tenant Relocations, Q2/2024
ORIGIN
ChiyodaChuo

MinatoShibuya

Shinjuku

Other

7

8

20

8

6

20

1

1

5

Chiyoda

1

8

Chuo

2

1

4

DESTINATION

6

1

2

14

1

1

5

27

Minato

2

6

1

1

10

Shibuya2

Shinjuku

17

Other

1
1

1

1

1

2

12

Source Nikkei RE, Savills Research & Consultancy

TABLE 2: Notable Office Leasing Transactions, Q2/2024
BUSINESSSECTOR

TYPE

Mitsubishi HC
CapitalFinancial
Services

HQ Relocation& Office
Consolidation

Sompo Himawari
Life InsuranceLife Insurance

HQ Relocation

PayPayPayment
Services

COMPANY

Ajinomoto

Mitsui Knowledge
Industry

FORMER/CURRENTLOCATION

NEW LOCATION

Multiple

Torch Tower

Multiple

ChiyodaSumitomo Fudosan Shinjuku
Central Park Building

Sompo Japan Kasumigaseki Building

Shinjuku

ChiyodaMultiple

Yotsuya Tower

Multiple

Shinjuku

Sanei Building Annex

TODA BUILDING

Chuo

Chuo

Atago Green Hills Mori Tower

Minami-Aoyama 3-Chome Project(Tentatively named)

MinatoMinato

HQ Relocation& Office
Consolidation

Food andHQ Relocation
Biotechnology
Information
Technology

HQ Relocation

APPROXIMATE SPACE
TSUBO

SQ M

6,000

19,8005,000

16,5005,000

16,5003,600

11,9003,340

11,000Source Nikkei RE, Savills Research & Consultancy

GRAPH 4: Office Supply (GFA) Estimates* for the
C5W and the 18W, 2024F to 2027F
C5W

18W

450

GFA (THOUSAND TSUBO)

400
350
300
250
200
150
100
50
0
2024F

2025F

2026F

2027F

Source Savills Research & Consultancy*Adjusted GFA figures based on estimated office floor space.

savills.co.jp/insight-and-opinion/

Yotsuya Tower will see a significant
office movement in early 2025, with PayPay
intending to replace LY Corporation byleasing 5,000 tsubo of office space fromthe 21st to the 30th floor of the building.
Meanwhile, DesignOne Japan will relocate
its headquarters to the Shinjuku East Square
Building between August and September
2024, leasing an estimated 400 tsubo of officespace together with its subsidiary, Deech.
TOKYO OFFICE SUPPLYThe Tokyo office market demonstrated
notable resilience, successfully absorbing
most of the new office space in 2023. Initialconcerns regarding the large supply have been
mitigated by strong corporate performanceand the return to offices, which have driven
demand for the new additions. The upcoming
new supply in 2024 is relatively limited (Graph4) which should allow the market to continue
its positive trajectory, though the office supply
4

forecast in 2025 will be large, particularly in
the Takanawa submarket (Graph 5). Despitesome observers’ expectations of a potential
economic slowdown, optimism prevails in
the Tokyo office market, fuelled by soundtenant demand, hinting at further market
improvements ahead, discussed in greater
detail in our spotlight report “Tokyo Office
Supply 2024”.
The supply of new office space in 2024
is expected to be moderate, which should
provide the market with some breathing room
to absorb existing vacant space and facilitate
further growth. The sound leasing demandhas been evidenced by smooth pre-leasing
activities for many incoming properties. For
instance, SHIBUYA AXSH in Shibuya has seen
strong pre-leasing activity, demonstrating
the high level of demand for modern officespaces. The shift in tenant preferences
towards modern offices, strategically locatedclose to metro stations and public transport

Office Leasing

GRAPH 5: Office Supply (GFA) Estimates* bySubmarket, 2024F to 2027F
2024F

2025F

2026F

2027F

Toranomon &Roppongi
Roppongi
Takanawa
Shibaura& &Shibaura
Hamamatsucho
Hamamatsucho
Nihonbashi
Nihonbashi&&
Yaesu
Yaesu
Shibuya
Shinjuku
Marunouchi &OtemachiOtemachi
0

50
100
150
200
GFA (THOUSAND TSUBO)

250

Source Savills Research & Consultancy*Adjusted GFA figures based on estimated office floor space.

hubs, with modern amenities supporting communication,and strong ESG specifications, among others, has led to manytenants being willing to pay a premium for such features.
Conversely, older and poorly located offices, especially insome areas of Minato and Chuo, continue to struggle. These
challenges may be exacerbated by the large incoming supply inthese wards over the coming years.
Looking forward, several significant projects are in
the pipeline, set to redefine the Tokyo office market
landscape. In 2025, the Takanawa submarket will emerge
as a competitive office market with the completion of
TAKANAWA GATEWAY CITY project. This mixed-use
development, featuring office space, retail, residential
units, and an international school, has already garneredstrong interest securing large tenants like KDDI. The trend
towards mixed-use developments has been increasingly
popular and has become a defining standard for largerscale projects. Mixed-use buildings offer versatility to meetthe evolving demands of tenants, and diversify revenue
streams, and hedge against unforeseen circumstances.
Furthermore, the mixed-use development trend tends
to reshape the atmosphere of these buildings and theirsurrounding areas, creating a city-within-a-city ambiance,
ultimately boosting the value of office spaces, and driving
up demand for floor space among businesses within thesesavills.co.jp/insight-and-opinion/

environments. Elsewhere, other notableprojects slated for completion in 2025 include
the Yaesu 1-Chome Project in Nihonbashi& Yaesu and the Shibaura 1-Chome ProjectSouth, both of which are already mostly
pre-leased, although the former is likely toface a delay in completion until 2026 due
to an on-site accident. In 2026, Nihonbashi
1-Chome Naka C Project, and the second
phase of TAKANAWA GATEWAY CITY,
THE LINKPILLAR II is scheduled forcompletion. Additionally, the redevelopmentof the Oimachi station front area will deliver
mixed-use towers and public green spaces,
further transforming the Takanawa andShinagawa & Osaki submarkets.
Looking further ahead to 2028, theMarunouchi & Otemachi submarket will
welcome the iconic Torch Tower, the tallest
office building in Japan, as part of the Tokyo
Torch project. This development is expected
to transform the northern edge of Tokyo
station and attract high-profile tenants.
Other significant projects include theredevelopment of the Tokio Marine Nichido
Building and the head office of MUFG,
which will add premium modern office space
to the market.
Despite the optimistic outlook, several
risk factors could impact the market’s
stability. Labour shortages, new regulations
on overtime construction work, andinflation may cause delays in delivering
new supply and increase construction
costs. These factors could also affecttenant relocations, with some companies
potentially postponing office moves due toelevated initial moving costs. At the sametime, these delays might offer a silver lining
by subtly balancing supply and demand.
Overall, the Tokyo office market is primed
for further growth in 2024, driven by moderate
supply and sound demand. The shift towards
mixed-use developments, coupled with robust
corporate performance, is expected to support
rental growth and stabilise vacancy rates.
While challenges remain, the overall outlook
for the Tokyo office market in 2024 and beyond
is optimistic.

5

OUTLOOKThe Tokyo Grade A and large-scale Grade
B office markets continue to recoverin Q2/2024, with both average rents
and occupancy experiencing steady
improvements from the previous troughseen between late 2022 and late 2023. The
large supply of office space in 2023 wasuneventfully absorbed, owing to strong
corporate performance and the increasing
return to offices. With limited supply in 2024,
the Tokyo office market should continue toperform well for the remainder of the year.
Companies have been gradually phasingout flexible work arrangements since 2022,
and with Japan’s work culture generally
advocating in-person attendance, thistrend is likely to continue. However, someflexible work arrangements are likely tolinger, driving demand for offices equippedwith private booths and modern meetings
rooms to facilitate seamless communication.
Additionally, companies are also increasingly
enticed by larger and high-quality offices
to gain an edge in talent acquisition in acompetitive labour market. Therefore, thebifurcation between modern buildings inprime locations and older, less accessiblebuildings with poor amenities is likely toremain or even widen for the time being.
Looking ahead, the significant influxof new office supply forecast for 2025 may
introduce some volatility to the market
but should not be a major concern given
the overall sound demand, with greater
confidence stemming from the uneventful
uptake of the large supply in 2023 as wellas encouraging pre-leasing activities
already observed for the incoming supply.
Despite potential challenges such as labour
shortages and construction cost inflation, theoverall outlook for the Tokyo office market
remains optimistic backed by increasing
demand. Projecting further ahead, notablecompletions such as the TAKANAWAGATEWAY CITY project in 2025 and theiconic Torch Tower in 2028 are set totransform the office landscape in Tokyo,
driving further demand.